3 Monster Driverless Car Stocks to Buy and Hold for Potentially Lucrative Returns

Driverless cars are the hot new thing among many automotive investors and analysts, and the potentially lucrative future is tantalizing. According to an autonomous vehicle market forecast from Next Move Strategy Consulting, the global driverless vehicle market was roughly $106 billion in 2021, but is expected to grow to over $2.3 trillion by the end of the decade. The question for investors is: How do we invest in this future? This is a good place to scratch the surface with three driverless vehicle stocks that could end up becoming monsters long-term.

Processing power for the win

Nvidia (NASDAQ: NVDA) is pretty close to a household name, at least within the investing community that's well aware of its eye-popping gains over the past decade. The company enjoys durable competitive advantages, or an economic moat, thanks to its leadership in graphics processing units (GPUs), hardware, software, and networking tools -- all of which revolve around the artificial intelligence (AI) world.

While Nvidia will be certainly tied to the AI industry long-term, investors have high hopes for the company's automotive business as greater processing power will be absolutely needed in more complex active safety systems, as well as driverless vehicles. According to Morningstar, Nvidia's automotive business is expected to grow at a 20% compound annual growth rate over the next decade to reach nearly $11 billion in fiscal 2035.

Investors looking for a brilliant way to play the driverless vehicle future, while owning a business that's generating immense value outside of the automotive industry, should absolutely take a look at Nvidia first.

So much more than calculators

Texas Instruments (NASDAQ: TXN) is probably more well known for its calculators found on school desks across the globe, but it generates roughly 95% of its revenue from semiconductors. Texas Instruments is the world's largest maker of analog chips, which are used to process signals such as sound and power.

Here's the good news for Texas Instruments investors, especially when it comes to the automotive industry. Automotive, industrial, and communications infrastructure consumers are highly unlikely to choose inferior or unproven analog chips or microcontrolers (MCU) to save a buck on crucial pieces of equipment that could be valued at tens of thousands of dollars. Driverless vehicles are expected to have a much longer lifespan than a product such as a calculator, making Texas Instruments products a logical long-term choice for many automakers.

Another positive for Texas Instruments investors is that the company, similar to Nvidia, has a solid economic moat thanks to its intangible assets revolving around the analog chip designs and manufacturing experience, as well as switching costs -- it's more difficult for a customer to swap out analog chips that have been designed for a specific device.

Pushing the envelope

QuantumScape (NYSE: QS) is far from a household name and its journey has only just begun. The company develops the next generation of solid-state lithium-metal batteries for use in electric vehicles (EVs) and other applications. Imagine an EV battery that offers vehicles better range, faster charging, and improved safety, and costs less than the status quo -- that's essentially what QuantumScape set out to achieve, and testing has so far gone well.

One of the biggest reasons for optimism for QuantumScape investors is the company's strategic collaboration and licensing agreement with PowerCo, the battery company of Volkswagen Group. Further, just recently news hit the markets that this strategic agreement is expanding and under the new terms PowerCo will provide up to $131 million in new payments over the next two years if the joint venture achieves specific milestones, the first of which has already been reached.

The expanded partnership will enable PowerCo to produce QSE-5 battery cells earlier than anticipated and will accelerate the timeline of QuantumScape's pilot-line development. This just brings QuantumScape one step closer to its goal of commercial production of its solid-state batteries which, if achieved, would significantly change the EV industry for the better. While QuantumScape's batteries will be used in a wide range of EVs, it is particularly intriguing when EVs are combined with driverless vehicles for robotaxis, and extending their range and cost effectiveness would be in huge demand long-term.

Buy and hold

The hype and expectations for driverless vehicles has died down a bit as investors come to grips with the difficulty in perfecting this technology, while juggling evolving regulations surrounding the industry. However, as far as driverless stocks go, these three are almost no-brainers, not only because they have significant opportunity as driverless vehicles gain traction in the real world, but because their technology and products extend beyond the automotive industry giving investors some relief with diversification. If you're interested in investing in the future of driverless vehicles, start by scratching the surface of these three potentially monster stocks.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Texas Instruments. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.